Cases 1

Negotiation Style and Frameworks

by Steven Roberts (Negotiation Style - concessions and frameworks | Negotiation Experts)
A case study that shows how important it is to consider whether or not to accept concessions
by taking a reasonable perspective and framework.
On a scorching summer day in August, 1990, the citizens of Kuwait stared in puzzlement at
the encroaching, dusty streams of what appeared to be a pending desert sandstorm, creeping
ominously towards them from across the forbidding dessert. To their dismay and horror filled
eyes, the quaking citizenry had become helpless witnesses to the advancing units of Saddam
Husseins Iraqi army, relentlessly engaged in the illegal invasion of their homeland. There
had been no warning of this pending disaster. Kuwaiti resistance was swept aside much like
one casually brushes away a crumb from ones lapel.
After six days, Hussein declared that he had annexed Kuwait. The world was stunned by
Husseins audacity, and the Middle East became very anxious about what the future may hold
for this unsettled region. By August 30, the Arab League, called by President Mubarak of
Egypt, attempted to defuse this potentially explosive crisis through applying negotiation
skills.
The Arab League proposed to Hussein that if he would withdraw his troops, they were
prepared to offer him several concessions. Through several negotiations, the Arab League
eventually framed a very generous negotiation proposal that they attempted to present to
Hussein in a packaged offer.
The three major negotiation concessions offered to Iraq were as follows;
1) Iraq would take control of the Ramallah oilfields, which Hussein claimed had been stolen
from Iraq in their ongoing border dispute with Kuwait.
2) Iraqis would take possession of Bubiyan Island, which was an island located in the Persian
Gulf, and which abutted closely to the Iraqi shoreline.
3) The third concession entailed the wiping out or renegotiating of a $14 billion war debt that
Iraq held with Kuwait since the Iran-Iraq war. This last concession was still open to
considerable negotiation, allowing plenty of latitude for pending discussions.
Hussein had two ways to view how he could frame the Arab Leagues proposal. He could
look at it from the viewpoint of what he would win if he did withdraw his troops, or he could
consider what he might stand to lose if he withdrew his troops two very different
perspective frameworks of the same situation. In the end, he chose unwisely.
Hussein chose to take the perspective of what he would lose. The princely concessions
presented by the Arab League were disdainfully refused by the arrogant Hussein with little
consideration. He decided that since he already occupied all of Kuwait, anything else would

be seen as a loss to him as he was now in possession of all of Kuwait and its incumbent
resources anyway.
He could have viewed it from the alternative position of all that he would have won for just a
few weeks work, and would have received as concessions from the Arab Leagues proposal.
The Iraqi leader might have been thinking about his decision as a powerful coalition of allied
forces dogged his beleaguered and battered army which was retreating deep into the heartland
of Husseins native Iraq, leaving its charred carnage in its wake. It was costly lesson to learn.
Is the glass half or is it half full? How you view it can mean everything.
------------Case 2
CASE STUDY 2 (The Negotiation Problem - issues and solutions | Negotiation Experts)
this case study shows how two parties can find a successful negotiation resolution by tackling
the issues in a creative and mutually beneficial manner.
One of the biggest stumbling blocks encountered by a negotiator is to clearly understand the
real issues as the root cause and basis for the negotiation in the first place. All too many
times, negotiators take insufficient time to clearly identify and frame the problem or issues to
be resolved and negotiated. This is the crucial first step to any negotiation. If this first phase
of the negotiation process is not addressed properly, than it is quite likely that the rest the
whole negotiation process will unravel because the core issues were not properly understood
at the outset.
Lets look at an example case study which emphasizes the need to define and identify the
problem. In this example, a substantial electronics firm face considerable difficulties in one of
their subassemblies. The root core of the problem revolved around certain types of fittings
and pins that were becoming bent and distorted by the operation of the machinery. Units
which were being produced were damaged and had to be rejected because of imperfections.
These rejected components were put aside and then re-worked later on in the month.
This duplication of effort resulted in increased costs as workers had to work overtime to meet
their quotas. These extra costs for the extra work performed had not been considered in the
manufacturing budget. The manager of this subassembly line did not want be charged with
these overhead expenses because he felt it was not their responsibility. Likewise, the manager
who was the overseer of the final assembly department also refused to accept the increased
costs to his budget. He argued that the extra costs were a direct result of the poor work of the
personnel in the subassembly department as this was where the problem originated.
The subassembly department manager countered this argument by claiming that the parts
were in good condition before they left his department and that the damage must have
occurred in the final assembly managers department instead. Both parties had reached an

impasse.
Some time passed before a resolution to the matter was worked out that was agreeable to both
parties. What both parties were really seeking was to find a long term solution to this
dilemma. It was only when they truly understood the nature of the problem they were able to
negotiate a reasonable solution that was acceptable to both of them.
It was ascertained that the subassembly workers had some slack time available during every
working month. The damaged parts were returned in small batches form the final assembly
plant so that the subassembly personnel could work on them during these slack periods. Also,
when they examined the problem in more minute detail, the managers learned that some of
the personnel in the final assembly plant may not have been adequately trained and may have
also been partially responsible for the damaged incurred. These personnel were identified and
were sent to the subassembly plant to further their training and to learn more about what
transpired in that department.
The resulting solution addressed the increased cost concerns of both departments on the one
hand. On the other hand, overtime was reduced by allocating the personnel where and when
they most needed and finally, because of the enhanced training, the number of damaged parts
was considerably reduced.
The lesson to be drawn here is that the two managers were only able to address the problem
when they were able to understand the real issues that lay beneath the problem as the cause
for their cost overruns.
----------3
Nepal-India Water Negotiations (Power Asymmetry)
Negotiations between India and Nepal on water resource projects are a good illustration of
negotiation power asymmetry. India is 40 times larger in land area than Nepal and India was
hungry to meet its increasing electrical power needs. Nepal is one of the poorest nations in
the world and is economically linked to India because of its geographic situation. However,
Nepals water wealth is enormous. Several studies revealed that 89sites within Nepal are
potentially capable of producing 30 giga watts of hydroelectric power to energy starved India.
The multibillion capital investment required to develop these projects is well beyond Nepals
capacity, and to a lesser extent, Indias as well. Previous negotiations on completed projects
between the two countries in the mid 1960shave resulted in India retaining control over the
headwaters located in Nepal. Due to this imbalance of control, Nepal has deliberately
forestalled the development of further major projects. Since then, four independent foreign
studies of medium and large term hydroelectric projects were identified. At issue was the
Karnali project which could produce a potential output of 10.8 GW. The initial feasibility
studies on the Karnali project failed to take into account the impact of this product on
financial feasibility and its sociological impact on Nepal. Another issue of contention for

Nepal was that during their negotiations, India denied or gave lip service to issues
surrounding irrigation and flood control. Additionally, India demanded that they would only
be prepared to pay for the cost of the energy and not for the cost of peaking power which
meant most of the cost would be transferred to Nepal. Nepal demanded it wanted to link the
cost of electricity to the cost of alternative thermal energy to enhance its profit
Nepal politicians came under strong pressure to develop these water resources. Nepals stall
tactics also came under the gun. In 1991, a newly elected government in Nepal proclaimed it
had come to an understanding with India on a number of water resource issues. This
understanding caused a great furore amongst the opposition parties and the general public.
This resulted to a change In Nepals government which changed their absolute monarchy into
a combined constitutional monarchy and parliamentary democracy. The new government
amended their constitution. The government passed a new order, Article 126(2) which stated
that any sharing of water resources would require an approval of a2/3s majority in
parliament. On water resource projects, Nepal did hold one other major negotiation card in
that Nepal had the right to veto a proposed hydroelectric water project. India was now placed
in a weaker negotiating position because any proposals would now have to please not only
the incumbent government but also the opposition parties, or a majority segment of the
population. This forced India to restructure its negotiating framework. Negotiations were
ongoing throughout the early 1990s. In February of 1996, the prime ministers signed a major
treaty that addressed several sub projects. In Nepal, parliament voted on ratifying the treaty.
The opposition party was split due to a number of unresolved negotiation issues. It was not
until the fall of 1996when the opposition party was able to iron out their differences that a
two thirds majority was attained and the Mahakali Treaty was ratified on September 20, 1996.
4
----------Contract Renegotiation with the Chilean Government
Although starting a contract renegotiation at a disadvantage, with a weak BATNA, US
company Kennecott managed to enhance and turn things around with an offer the Chilean
government couldnt refuse. In the 1960s Kennecott, a U.S. company, was about to enter into
renegotiation over its contract with the government of Chile concerning its El Teniente
copper mine. At the time, Chiles BATNA appeared overwhelmingly strong as the
government was possessed of a strong pro sovereignty stance towards foreign management of
its natural resources. Can we take some lessons for our mortgage renegotiations? The
government of Chile was politically positioned to establish their own tough financial terms or
had the option of declining to renegotiate by simply ejecting Kennecott from their
involvement altogether by expropriating the mine. Chile had its own experts who could
manage and operate the mine, perform the processing, and could readily market this very
useful natural resource. Simply put, Kennecott found itself in the position of either acceding
to the contract renegotiation terms dictated by the Chilean government or have the mine
snatched out from under them. Realising that their own BATNA was weak, Kennecott
executives came up with a very creative solution which ultimately weakened Chiles position
while leveraging their own BATNA more favourably by creating value for both sides. The

proposal made by Kennecott entailed the following six point strategy thereby changing the
rules of the game:
1. The deal consisted of Kennecott offering to sel l a majority equity interest
in the mining operation to the Chilean government.
2. Realising that Chile would not particularly care to di vest the funds of the
sale into U.S. banks, Kennecott offered to use the funds, combined within outside
loan, to finance the mines expansion. This allowed Chile to preserve its nationalistic
interests and have greater financial gain from future profits. They were able to
renegotiate and establish a partnership which was mutually acceptable to both parties.
3. Next, Kennecott then persuaded the Chilean government to guarantee the
loan and have this guarantee subject to the law of the state of New York.
4. Then, as many of the company's mining assets as possible were insured
with U.S. backed guarantees, against the potential expropriation threat.
5. Kennecott then negotiated that the copper output derived from the
expansion would be sold exclusively to clients in Europe and North America
6. Lastly, the rights to collect from these new contracts would be sold to a
consortium of financial institutions based in Japan, the United States and Europe
7.

This allowed for a greater diversity in the customer base and additional partners. In future
contract renegotiations, this would result in a much larger multi party negotiation then just
Kennecott having to renegotiate on its own. Many of these outside interests would also be
engaged in other unrelated negotiations with the Chilean government, thereby reducing
Chiles leverage in any future contract renegotiations. Mortgage re-negotiators won't have as
much flexibility to change the negotiation game when they renegotiate their contracts. Lastly,
because of the insurance guarantees obtained by Kennecott, even if there negotiations
collapsed, Kennecott had succeeded in protecting a good portion of its interests should Chile
opt to go ahead and appropriate the copper mine. Additionally, the company could also call in
its other partners to act as allies. In the end, some years later, the mine was eventually
expropriated by Chile, but Kennecott was in a far much better position than it had initially
been before it initially started to renegotiate the contract. Kennecott enhanced its BATNA by
making an offer the Chileans couldnt refuse, while taking steps to protect their interests
should negotiations collapse
------------5

Bargaining Price with the Chinese

By Dr Bob March Chinese haggling tactics and bargaining can result in foreigners making
costly concessions.
Overview
K. G. Marwin Inc. developed a particular technology in the 1980s, called the Trilliamp
Process that the Chinese government sought to integrate into an ethylene facility in Lanzhou,
the capital of Gansu province. It signed a contract with Marwin, which in 1985 invited
inquiries from U.S. and Japanese manufacturers for production of the machinery. Marwin
recommended the Japanese company Auger-Aiso as most capable of producing the turbines,
while the Chinese invited two U.S. companiesFederal Electric and Pressure Inc., which
manufactured through the large Japanese trading company Mitsuboto compete for the
multi-million-dollar contract. The Scene to undertake the negotiations with the three
prospective suppliers, six Chinese officials and three representatives from the Bank of China
were selected. The Auger-Aiso chief negotiator was Todman Glazer, the companys Japan
branch manager from the United States who resided in Tokyo and was assisted by his
Japanese colleagues. Glazer remembered the tight deadlines he had faced on previous trips to
China; now positions had been reversed, with the Chinese facing the pressures and deadlines.
He realized the value of thinking like ones opponentseeing things as they do. This was the
first potential deal with China in the ethylene market, and Auger-Aiso faced stiff competition
from Mitsubo, which had already cornered the Chinese oil-processing market.
At the first negotiation meeting in Beijing, the Chinese insisted that custom required the
visitorGlazerto make the first presentation. This he did, even though he was accustomed
to allowing his opponents to speak first. Glazer began by addressing the excellence of AugerAiso technology, explaining that the manufacturing would all be done in Japan to ensure
product excellence. When the Chinese offered no indication of their position or price, Glazer
felt obliged to quote an upper-range price that would allow flexibility. The Chinese still made
no comment.
In the afternoon, the Chinese heard offers from the combined Mitsubo-Pressure team, then
Federal Electric. By the end of the day, Federal Electric had dropped out of the race,
accepting that it could not compete. Revolving Doors, Changing Moods During the first week
of negotiations, a pattern emerged. The Chinese would meet with Glazer and his colleagues
in the morning and ask for a price, saying that their competitors had already bid such-andsuch a price, which was invariably lower than the last Auger-Aiso bid. They would meet with
Mitsubo-Pressure in the afternoon and use the same approach, causing the latter to drop its
price. Moreover, each meeting would end with the Chinese saying, We will call you
tomorrow. But, because they never called, both prospective vendors became panicky and
visited the Chinese office without notice to present an even lower bid. As the Chinese kept
the vendors guessing and in the dark, Glazer understood how the Chinese had earned a
reputation as master negotiators. At the second meeting, tactics changed and there were
different people representing the Chinese side. An antagonist would suddenly burst out in
loud Chinese and harangue the Auger-Aiso side for some fifteen minutes, complaining about
the quality of the machines they were offering. A protagonist would then intervene and,

apologizing for his colleague, would say he had been upset about the current situation. Glazer
regarded these outbursts as no more than arranged role playing, designed to make the
protagonist (the good guy) appear more trustworthy to the foreigners. But, Glazer realized, all
the participants were play-acting.
Then there was yet another change. The Chinese located the Auger-Aiso and MitsuboPressure teams near the meeting room, in adjacent rooms. Mitsubo-Pressure would be called
in and asked for its best price. After the team had returned to its room, Auger-Aiso would be
called in, told the latest price, and asked if it could beat this. When the prospective vendors
could drop their price no lower, they would add something to the package. Auger,
for example, added oil gauges for its turbines, effectively a three-percent add-on. Even so, the
Chinese still would not commit to placing an order. When the Price Is Right Glazer could
hardly believe that he had lowered his price twenty per-cent that week; to do so would have
been out of the question in the United States. On the final day, Auger-Aiso made another offer
and, for the first time, the Chinese made a counter offer. Auger-Aiso accepted, and
agreement was reached. A few hours later, Mitsubo-Pressure came back with an even lower
price, but the deal had already been struck. Glazer spoke later about how difficult it was to
compete with Japanese trading companies, explaining that U.S. companies had so many
factors to bear in mind, including insurance and a variety of liabilities. Meanwhile, Japanese
trading companies, which had vastly different legal parameters [within which] to operate
within, could more easily focus on getting contracts and closing deals. He believed that
Auger-Aiso had been awarded the contract because it had been the preferred supplier right
from the start.

------------6

How Giving Face Can Brew Success

By Dr Bob March Shows how understanding cultural differences and learning to work within
them is the key to successful negotiations. Find out how knowing the importance of giving
face in China gained trust and landed a series of important contracts. Overview Peter
Benjamin, the owner of an Australian chemical engineering consultancy, has a warning for
those wanting to do business in China: Many Chinese see it as their patriotic duty to shoot
down foreigners, so you can be like a clay pigeon at target practice. Despite this, Benjamin
has been successful in China and irresponsible for the design of many of the countrys
modern breweries. He was invited to submit a proposal for a huge Guangdong brewery by Dr
Pasteur Lai, the son of a former Chinese minister of health and now an Australian citizen.
Laihad many connections deep within the Chinese government, had done his homework on
Benjamin, and was able to report to the Chinese that Benjamin was the premier brewery
designer and builder in Australia. The Scene Benjamin was initially cynical. We get a lot of
tire kickers in this businesspeople who arent serious about a project but just want to test
the waters, he explained. Benjamin sent the Chinese a questionnaire, asking for information
about specifications, resources, brewery capacity, products they planned to produce, budget,
and business plans. The response he received convinced him to head to China to discuss a
potential deal to build Guangdong provinces largest brewerya $20 million project. But,
having heard from others about their China experiences, he decided to pitch only for the
business in which his company had special technology to offer. One of the first things you
need to understand about China is that you cant compete against cheap, local rivals, he
advises. The Chinese only want foreigners involved if we can offer special technology they
cant get at home. We knew if the Chinese could have got locally what we offered, they
would not have approached us. Preparing to Negotiate In the lead up to the negotiations,
Benjamin knew his business could provide strengths the Chinese business lacked. He had
access to technology that could increase the capacity of the planned brewery while also
reducing waste. He specialized in understanding and predicting market trends and had access
to sophisticated, international market data the Chinese company lacked
The Chinese party had no experience in designing breweries whereas, since1983, Benjamin
had built or redesigned all Australias major breweries and most of its boutique breweries.
Before starting negotiations, he did extensive research on the Chinese market, including its
beer industry and the Guangzhou company. He found that, despite the companys listing on
the Shanghai Stock Exchange, it had direct links to the Chinese government. If youre
working with a brewery in China, youre working with the government, because the industry
is so tightly regulated. I also found that the government department in charge of the alcohol
industry is run by exRed Guards, so I knew I was dealing with people who had to report
back to important government figures. I thought that, if I could find ways to make them look
good in the eyes of their bosses, it would help in developing a beneficial business
relationship, he said. When Benjamin arrived in China, he discovered that the Chinese were
also talking to German, French, and Belgian companies, and that the Chinese companys
plans for the brewery were not as well defined as had initially appeared. I decided my job
was to be the expert, and I knew I should tell them what they needed, rather than let them tell

me. It was clear they knew nothing about designing breweries. Benjamin also understood
the sensitivities in pointing out the shortcomings of the Chinese plans. He had spoken with
Chinese Australians (including two on his staff who had become the key members of his team
in China) and read widely on Chinese culture, so he recognized the risk of causing the
Chinese to lose face. To avoid doing so, he offered to work with the Chinese on developing
the competitive brief using the latest technology. This would allow him to begin building
relationships with the Chinese before the tendering process had begun. It would also give the
Chinese lead negotiator face with his bosses (and the Chinese government officials), as he
would be able to develop a better business brief using foreign technology. It also gave
Benjamins business a head start in the tender competition. Uncommon Tactics Before
tendering began, we were working with the client to develop the brief while the other
companies were sitting around, he said. The Chinese arranged the accommodation for the
tendering companies. Each foreign teamthe French, Germans, Belgians, and Australians
was lodged by the Guangdong government at the same hotel. We would go and have a
meeting with the Chinese. When we got back to the hotel, the other businesses would always
be waiting in the lobby to be picked up for their meetings. It was made pretty clear that we
were competing against each other, Benjamin said. Working in such specialized field
brewery designmeant that the foreign negotiating teams knew each other, and they used
this to their advantage. We knew the Chinese were trying to pit us against each other, so we
turned their tactic around. We met every afternoon in the hotel bar and compared notes. We
could then work out together whether this negotiation was about price, technology,
reputation, or some other driver. Of course it was about price and technologyit always is,
he said. The negotiations took place over several weeks, during which each of the foreign
companies met with the Chinese team almost daily. We talked about the price and
technology constantly. We were always discussing the scope of the project, to fit it in with a
budget with which they were happy, but which still delivered excellent technology. There
were perhaps thirty Chinese, and every time we met, there would be different people talking.
Youd think you had an agreement, and then one of the Chinese would suddenly pull you
aside and tell you the complete opposite. It was very confusing. Shoring Up Advantage To
ensure he was not misunderstanding the negotiations, which were being conducted through
an interpreter with the Chinese team, Benjamin had brought from Australia two of his Chinaborn staffa chemical engineer and an accountant. I decided I needed to use my two
Chinese team members as my interpreters, because the Chinese language is often not explicit:
The meaning of what they were saying was often only implied. It was the best decision I
made, because I got the chance to log onto real feedback. Benjamin also began to see the
language barrier as an advantage. Not knowing the language gave me carte blanche to
completely change my mind on things I already had said, because I could use the excuse that
I had not properly understood. They kept changing the negotiations on me, so it gave me the
chance to do the same back and get away with it. Benjamin had great respect for his
competitors. They were professional managers, corporate people. But they also had superior
attitudes toward the Chinese, and indeed also toward Benjamin and Australia. They refused to
believe that a world-class brewery designer could be found in Australia. After several weeks,
the French and Belgian businesses pulled out, frustrated at the drawn-out negotiating process.
They had offered their best price when first challenged and had left themselves no room to

manoeuvre. Between them, the French and Belgian negotiators had two other problems. First,
they were both professional managers involved in a number of projects, so it was easy for
them to give up and go home to take up other projects waiting on their desks. Second, no one
on the French team liked Chinese cuisine, so returning home looked very attractive to them.
Benjamin, however, was a specialist chemical engineer who owned his own business, had
already invested $350,000 in preparation, and was not inclined to walk away.
Patience Pays
I went in suspecting we were going to spend ninety percent of the time arguing price,
particularly since the Chinese started negotiating by crying poor. They kept saying they had a
limited budget, so I started high and kept shaving off the smallest amount, but never near my
limit. I knew from my initial questionnaire and research they could afford to pay what the
technology and I were worth. Even though this represented a great opportunity to enter the
Chinese market, I also needed to get properly rewarded, he explained. When I first got to
China I was told of a Chinese sayingChina has 5,000 years of history, so whats an extra
hundred years? This basically means that they are patient and will wait for the right deal. We
had invested a lot of money to go to China, and we were not about to turn around and come
home just because it was taking longer than we wanted. The Chinese team tried to use
Benjamins planned return date as leverage, in abide to pressure him into agreeing to their
price terms on the basis that he was leaving the country. But he recognized the ploy. I
realized they were dragging negotiations out until my departure, so I told them my date was
flexible and Id just stay until we finished. I acted as though I no longer had a deadline, and
politely pointed out they were the ones who had to build a brewery within ascertain time
frame. Benjamin spent every evening with his Chinese negotiating team, analysing each day
and trying to figure out the Chinese strategy. They would probe and explain to him Chinese
cultural perceptions, which Benjamin found invaluable for understanding the Chinese tactics.
Being Tested There was one meeting in which one of the Chinese team became very angry
and distressed. That night one of my interpreters told me that the individual had probably
been testing my reaction. He explained that Chinese dont do business with people they dont
know, and that sometimes they will use different emotions to see how the other party reacts
under pressure. Chinese culture is so different that you need that local Chinese input. You
can never have intuitive understanding of everything that influences and drives themthat
would take fifty lifetimes. The next best thing is to have local contacts to guide you.
Benjamin found other confusing elements about the negotiating process. We would have
in-principle agreement on issues, and then they would just change their mind. We have since
learned this is standard. Even if you have something in writing, it is only ever a discussion
document. The Chinese expect you to be like bamboo and bend with the wind. With the
negotiations down to just two companies, Benjamin tried a new tactic. He pitched the
environmental benefits of his brewery design, explaining how his technology could make the
Chinese brewery a world leader in waste management. His technological solution would
diminish environmental waste while ensuring maximum capacity and building up the Chinese
companys reputation as a world leader. Meanwhile, the Chinese team had also done its
homework and was secretly favouring Benjamins company based on its reputation for
delivering on time and to specifications. In the end, the specialist technology Benjamin could

offer ostensibly won him the contract. But Benjamin believes it was more about relationships
and face. I put effort into helping them look good. I designed the brief with them using the
latest technology. I helped solve other problems they had not considered, such as
environment management that would save them money. I suggested my solutions would
make their business a world leader. It was about giving them an opportunity to shine.
The Last Round of Negotiations
Before agreement was reached, and after the last of three proposals had been delivered and
considered, nine separate negotiations were held to discuss:
* Payment terms and advance payments
* Currency decisions
* Inspections policy
* Warranties
* Delivery of overseas and local components
* Commissioning and training of the Guangzhou Companys personnel Penalties
* Performance requirements
* Capacity to deliver
By this time, the Chinese team was reduced to twelve people. While Benjamin and his team
were in China on the last occasion, the Chinese team split in half and each went abroadto
Europe and Australiato evaluate Benjamins suppliers (and through them, him) of pump
valves, electronic equipment, stainless steel, and laser welding. His suppliers all appear to
have given him a pass mark, but one subjective problem remained. While Benjamins team
was well ahead of the other teams on all criteria, some members of the Chinese team
remained opposed to the Australian teambecause it was Australiansaying they wanted,
on the basis of image and reputation, a brewery designer and builder from Europe. The vice
governor of Guangdong province finally stepped in, we understand, and made the decision
inflator of Benjamins company. Within forty-five minutes of his decision, the negotiation
leader was on the phone to Benjamin at his hotel. We want you to sign the contract, he said
out of the blue and with no preamble. Come to the office now. Also bring $2,000 to pay for
the celebration banquet at lunchtime. Benjamin and his team went directly to the provincial
office. Before he signed the contract, he said to the team leader, Thank you very much for
your agreement to commission us to build your brewery. In consideration of that, we wish to
present you with a five percent discount. The step was artful. Bringing the project in five
percent under budget gave facet everyone on the Chinese team, including the vice governor.
They would not forget this.

----------7

Unequal Foreign Negotiation

This case study shows how a weaker negotiating party can negotiate successfully with a
stronger negotiating party in an international agreement. When two parties enter into an
unequal negotiation, in terms of the power they bring to the table, the interests or goals of
either party can have a dramatic influence on the positions they adopt in the negotiations.
Sometimes this can have the effect of giving the weaker negotiating power the opportunity to
gain advantages, and similarly, this unequal status can also be influenced by their interests to
their detriment. The negotiation case study of the U.S. Indonesian negotiations over the
Conditions of Aid is an example of both possibilities. The takeover of China by the
Communists in 1949 added a new geopolitical concern to the interests of the United States in
the Far East. Two theories of strategic concern were the Domino effect of potential
Communist takeover of countries near to Chinas mainland, and the Leapfrog theory, where it
was considered the Communists might try to gain control of a country within the protected
geographic sphere, and deemed a protectorate or ally of the Unites States. Of considerable
concern was the potential threat to Indonesia. In the Mutual Security Act of 1951, the U.S.
committed its government to providing aid to foreign countries but only in regards to that
foreign governments return commitment to U.S. long term interests. The U.S. used trade
embargoes against Communist countries, and in particular China, especially as the U.S.
became engaged in the Korean conflict. A foreign country could not expect any foreign aid if
it were to engage in any form of trade with a member of the Communist bloc. Indonesia
considered itself a neutral country. It was responsible for roughly 40%of the worlds exports
in rubber. Indonesia was very strong nationalistic country and resented foreign intrusion into
its affairs. There were many radical elements within Indonesia that sympathized with
Communist China. The Indonesian government did not want to provide the same level of
commitment required buys. Policies. Its goals consisted of the demand that the U.S. provide
assistance in the stabilization of the international price of rubber and tin. It also wanted
considerable compensation in the form of foreign aid to beef up its own internal security and
infrastructure. The interests of both countries were at cross-purposes and posed a challenge
for the negotiation that followed
U.S. Ambassador, Merle Cochran and the Foreign Minister of Indonesia, Subardjo signed an
agreement that did not have the support of the Indonesian Cabinet. As matters developed, it
became clear that if the Americans were to use the purchase of large quantities of rubber and
tin conditional on Indonesian acceptance to the American interests, this perceived obedience
to American policies and interests would meet with stiff opposition within Indonesia. In fact,
the Indonesians made it quite clear they would walk rather walk than submit tony attempt at
coercion by the U.S. Potentially, Indonesia could have traded with China instead. As a result,
Indonesia signed a very agreeable deal, known as the Cochran-Subardjo agreement that was
signed on January 5, 1952. Indonesia did not have to commit to any mutual defence treaty
with the U.S. However, when the agreement became public, a huge outcry erupted from the
Indonesian nationalists. Subardjo was removed from his office as was the pro U.S.
Indonesian cabinet. At the insistence of the new Indonesian negotiators, negotiations were
now conducted in Washington. The more militant Indonesian negotiators gave up some very
lucrative military grants to satisfy the nationalistic concerns of its people, but they did so

through their own choice. In other matters, the Indonesian gained many of their other
objectives, but the overall aid they could have procured was considerably diminished. U.S.
objectives were watered down in the ensuing agreement because in the end, Indonesia held a
stronger hand due to their indifference to the influence of foreign aid as an inducement to
comply with the U.S. position.